Associated Indem. Corp. v. Del Guzzo

• Decision Date: 22 July 1938
• Docket Number: 26660.
• Citation: 195 Wash. 486,81 P.2d 516
• Court: Washington Supreme Court
• Parties: ASSOCIATED INDEMNITY CORPORATION v. DEL GUZZO et al.

81 P.2d 516

195 Wash. 486

ASSOCIATED INDEMNITY CORPORATION v. DEL GUZZO et al.

No. 26660.

Supreme Court of Washington, En Banc.

July 22, 1938

Appeal from Superior Court, Thurston County; John M. Wilson, Judge.

Suit by the Associated Indemnity Corporation, a corporation, against A. Del Guzzo and others, to determine plaintiff's liability on a contractor's performance bond, wherein the National Bank of Commerce of Seattle, a corporation, filed cross-complaint. From an adverse decree, the National Bank of Commerce of Seattle appeals.

Modified and, as modified, affirmed.

Kerr McCord & Carey, of Seattle, and W. H. Abel, of Montesano, for appellant.

Grinstead Laube & Laughlin, Arthur Grunbaum, and Patrick A. Geraghty all of Seattle, and R. V. Welts, of Mt. Vernon, for respondent.

BEALS Justice.

The plaintiff, Associated Indemnity Corporation, a corporation, sued A. Del Guzzo, the National Bank of Commerce of Seattle, a corporation (hereinafter referred to as the bank or as appellant), Edward Nepple, and many other defendants, for the purpose of establishing plaintiff's liability as surety on a statutory contractor's bond, whereby plaintiff, under date April 12, 1934, underwrote the performance of Del Guzzo, who had contracted with Skagit county to construct a secondary highway. The defendants other than the three above named were urging claims against the job, but prior to the trial of this action, all claims except that of defendant bank were settled or abandoned.

By the pleadings as finally at issue, plaintiff sued the bank, Del Guzzo and Edward Nepple, alleging that the bank, with Del Guzzo and Nepple, plaintiff's own agent, had fraudulently misled plaintiff into executing Del Guzzo's bond, whereby plaintiff had been damaged in a large sum, for which, together with expenses, plaintiff demanded judgment. Defendant Del Guzzo answered, praying for judgment against Skagit county and the state of Washington for the balance due under the contract, while the bank, by way of a cross-complaint, demanded judgment against plaintiff for over $28,000, on account of claims against the job for labor, material and supplies furnished therefor, which claims the bank owned by assignment. Plaintiff denied that the claims owned by defendant bank were lienable, and asked for judgment as above stated.

Upon the somewhat complicated pleadings, the issues having been made up, the action was tried to the court, and resulted in a decree in plaintiff's favor, the court having found that the bank, Del Guzzo and Nepple had fraudulently conspired to cause plaintiff to execute Del Guzzo's bond; that plaintiff had suffered damage thereby, and was entitled to relief against the defendants. The decree dismissed the bank's cross-complaint with prejudice, awarded to plaintiff the sum of $13,678.83, being a portion of the retained percentage and pre-final estimate under the contract deposited in the registry of the court by Skagit county as admittedly due for work performed under the contract, and further awarded plaintiff judgment against the bank, Del Guzzo and Nepple, jointly and severally, in the sum of $17,042.35. From this decree, defendant bank has appealed.

Appellant assigns error upon the entry of judgment against it in favor of respondent, contending that respondent was not entitled to judgment against appellant in any sum whatsoever, also contending that the trial court erred in awarding to respondent the $13,678.83, or any portion thereof, which Skagit county had paid into the registry of the court. Appellant also assigns error upon the refusal of the trial court to grant judgment in its favor for the sum of $28,128.89, or such lesser sum as the evidence warranted, against the respondent and defendant A. Del Guzzo, and against each of them.

The following is a brief statement of the facts as disclosed by the record: Defendant A. Del Guzzo had for several years been building roads, laying water mains, etc., under contract with the state or some municipal subdivision thereof. He was a client of the Montesano State Bank, of which W. H. France was manager. Later, appellant, National Bank of Commerce of Seattle, took over the Montesano State Bank, that institution continuing to function, under Mr. France's management, as the Montesano branch of appellant. Appellant acquired this litigation as a result of its absorption of the Montesano State Bank. Edward Nepple was local agent of respondent at Montesano, representing respondent in that vicinity. R. J. Wilton, a vice-president of respondent, was in charge of its Seattle office up to March 12, 1935, and Charles A. Prevost was in charge of respondent's surety bond business, with headquarters at San Francisco.

Appellant (and by appellant we refer to the Montesano State Bank as well as the consolidated institution) had financed several of Del Guzzo's contracts, including some work which he had done for Mason, Lewis and Pierce counties, as well as a road contract for the building of what is referred to as the Maryhill road. Respondent furnished bonds for all or most of these contracts. At the time of the signing of the Maryhill contract, November 8, 1933, Del Guzzo was indebted to appellant in the sum of $10,000, secured by assignments on the Lewis and Mason county contracts, and was also indebted to the Elma branch of the Montesano State Bank in the sum of $5,000. Appellant financed Del Guzzo under the Maryhill contract, but instead of taking security by way of assigned estimates as the work progressed, itself paid the laborers and materialmen, taking from them assignments of their claims against the job, guaranteed by Del Guzzo. It appears that some of the bills paid by the bank were for equipment and other matters which probably did not constitute claims for which respondent, as Del Guzzo's surety, was responsible. As Del Guzzo received warrants on account of the work, he deposited them with appellant to his own credit, and drew his checks against them. In this manner he liquidated his prior indebtedness of $15,000 to the bank and its Elma branch. The work under the Maryhill contract was in due time completed, and was accepted by the state March 30, 1934. Del Guzzo was then indebted to the bank upon his guaranty agreement, or notes, in the sum of approximately $15,000. There was still some money due him from Lewis and Mason counties, and some also on account of the Maryhill contract.

Respondent's agent, Edward Nepple, was naturally interested in assisting Del Guzzo and other contractors in procuring contracts which would require bonds. It appears that he and Del Guzzo had become quite friendly, the latter having been assisted by Nepple in various ways.

During the month of March, 1934, Skagit county advertised for bids for the construction of a road known as the Deception Pass secondary highway. Del Guzzo was then finishing the Maryhill job, and Nepple wrote to Skagit county for a copy of the plans and specifications covering the advertised work, which evidently were turned over to Del Guzzo, who went to Skagit county and looked over the ground, later submitting a bid. Realizing that if Del Guzzo's bid should be accepted he would have to file a bond in a considerable amount, Nepple, on March 28, 1934, prepared for Del Guzzo, in part at least from information received from him, a financial statement, which Del Guzzo signed. This statement, sworn to March 28th, was dated as of March 19th, and Nepple telephoned France, asking the amount of Del Guzzo's bank balance on that day. France stated he would not give the information until requested so to do by Del Guzzo, whereupon the latter himself made the request, and France wrote to Nepple a letter which is in the record Before us. In this letter, it is stated that Del Guzzo's balance, March 19, 1934, amounted to $882.65. The letter contained no reference to the fact that Del Guzzo was at this time indebted to the bank in the sum of nearly $15,000, on his agreement guaranteeing payment of the claims for labor and material and other items, which claims had been purchased by the bank.

Nepple promptly forwarded to respondent's Seattle office France's letter and the financial statement signed by Del Guzzo, together with a so-called report signed by himself. He also wrote another letter to Mr. Wilton, painting a highly colored picture of Del Guzzo's past performances and of his expectations if he should procure the Skagit contract. The papers were forwarded from Seattle to respondent's San Francisco office, and the application for a bond was accepted. Accordingly, the bond was executed by respondent's Seattle agent, and delivered to Del Guzzo April 12th. Del Guzzo was the successful bidder for the Skagit job, and received the contract therefor, filing the bond which respondent had executed for him April 16, 1934.

It appears that, April 21, 1934, France, Nepple, Del Guzzo and W. H. Abel, the bank's attorney, met at the latter's office in Montesano. The time for filing claims against the Maryhill job would expire April 29th. Mr. Abel testified that he believed that the claims which had been assigned by Del Guzzo to the bank were valid claims against the Maryhill bond which respondent had written. Certainly many of them were of that class. He also testified that both Del Guzzo and Nepple did not want the claims filed, and that it was finally agreed that Nepple, as agent of respondent, should execute on respondent's behalf an agreement or bond guaranteeing payment, within six months, of the claims against the Maryhill job which had been assigned to the bank. Nepple testified that, Before signing the agreement, he talked to Mr. Wilton, his principal, over the telephone, and was by the latter authorized to execute the agreement, and that he later...